July/August 2011

On the Cover:

Lumber exports from B.C. to China are hitting record levels. Recent trade figures show that the value of softwood lumber exported to China has surpassed the U.S., a powerful signal about the importance of Asia Pacific lumber markets.
Logging and Sawmilling Journal takes a look at the China lumber market in a special supplement beginning on page 36 of this issue. (Cover photo of B.C. lumber being loaded at the Lynnterm facility of Port Metro Vancouver by Rob Stanhope).

The recently created Northwest B.C. Forest Coalition is taking a co-operative approach to marketing the region’s forest resource—the province’s largest uncommitted wood basket—and the response to date has been very positive, with a number of interested parties.

The COFI annual convention is back, and Logging and Sawmilling Journal is the Official Show Guide: Read all about the convention, being held September 15 to 17 in Prince George, and how the recovery of COFI’s lumber producing members is benefiting almost all types of businesses in British Columbia.

The booming China lumber market

China: It’s the single biggest reason for the recovery of the B.C. forest industry and Logging and Sawmilling Journal takes a look at this booming market, and how to meet the needs of customers.

Florida-based Suwannee Lumber needed to find a way to handle dense, heavy and pitchier Southern Yellow Pine through its sawmill. The solution? Bring in the Canucks, in the form of Bosch Rexroth Canada and its MAC-8 control system.

Included in The Edge, Canada’s leading publication on research in the forest industry— now incorporated into Logging and Sawmilling Journal—read all about research projects related to Canadian Wood Fibre Centre/Natural Resources Canada, Alberta Innovates-Bio Solutions and FPInnovations.

TheChina LumberMarket

Making the move into China’s wood products market

Several basic strategies can help Canadian forest product companies prepare for the Chinese wood products market. According to Export Development Canada, the following are some of the most important.

Understand China’s business environment

- Your credibility with potential customers will depend on your grasp of local market realities, so do everything you can to understand them before you go to China. China is regionally diverse, so it’s not enough to know broad generalities about the country; you must be acquainted with the particular region in which you’re interested.

- Investigate and understand the strategy, strengths and weaknesses of your major Chinese and foreign competitors, and be sure you understand the potential competitive advantage that your product or service may have in China.

- Be aware that Chinese firms are tightly focused on price and value, and if you show a similar concern with the price-value relationship, they will be more receptive to your approaches.

Use experienced, high-level negotiators

- You’ll need staff with cross-cultural experience who already know or can quickly learn how Chinese business people negotiate.

- Negotiations can be lengthy. Potential Chinese buyers or partners much prefer to deal with senior management, so face-to-face senior contact is a necessity. You may lose a great deal of credibility if you negotiate through a lower-level employee who has to refer all decisions to your head office; at worst, the Chinese may decide you’re not serious about doing business with them, and will decline further contact.

- The emphasis on high-level negotiations may mean that your CEO will have to be extensively involved.

Ensure adequate financial and human resources

- Gaining an adequate share of the large and complex Chinese market can require substantial, upfront investment. Be sure before going in that you can raise the capital resources you’ll need.

- You may have to operate at a loss for two or three years before your Chinese business begins to turn a profit, so your company will need the financial capacity to sustain operations during this period. A recent survey by the Asia Pacific Foundation found that 76 per cent of Canadian affiliates in China were operating profitably.

- Be sure the relevant people in your firm are prepared to make trips to China as frequently as necessary to provide training, service, marketing and sales support. Be sure you have enough such people.

Establish a solid customer service infrastructure

- Make sure you have the people and the communications capacity to service your Chinese market. Also, don’t become overly dependent on a single employee in either China or Canada; be sure you have properly trained backup who can communicate effectively with your customers.

- Some communications needs can’t be adequately met with email or on paper—only talking will do. Consequently, you’ll need Chinese-speaking staff who can work with your Chinese customers, partners and suppliers.

- Potential Chinese customers will usually be concerned about doing business with a supplier on the other side of the world. Be sure you have credible answers for these concerns, and that your people know how to communicate them.

- Providing solid after-sales service and continuously building your business relationships are critical to winning contracts and sustaining success in China, so be sure to plan and budget for both.

Excerpted from Doing Business with China, A Guide for Canadian Exporters and Investors, from Export Development Canada (www.edc.ca).

Some things have changed for COFI sawmills—and some have not

Most regional lumbermen converging on Prince George for their annual Council of Forest Industries convention in the spring of 1975 were in a pretty sombre mood given the slumping levels of their respective businesses.

The members of COFI’s Northern Interior Lumber Sector (NILS), as it was then called, had endured a couple of tough years. The experts and commentators called it a recession or depression and the worst in 30 years. About 85 per cent of the NILS members’ total lumber production was destined for the U.S. But the market was in the tank while other operating costs were rising. The experts and commentators were predicting a high of 1.6 million housing starts by the end of 1975.

Canada’s share of the U.S. lumber market was around 21 per cent, up from about 16 per cent in 1968.

Japan, on the other hand, was registering around 2.8 million housing starts annually and the rate was increasing. Some NILS member companies had been seriously looking at the Japanese market since the early 1970s and promoting the use of SPF platform frame construction. In contrast, the B.C. coastal forest company MacMillan Bloedel began selling wood products into the Japanese market around 1923.

In 2011, it’s estimated about 70 per cent of the regional COFI membership mills lumber production is marketed in the U.S.

And a revealing fact from the summer of 2011. In May, for the first time, Chinese buyers paid more for B.C. softwood lumber exports than their counterparts in the U.S., according to B.C. Stats figures.

Some things have changed for COFI sawmills—and some have not

Most regional lumbermen converging on Prince George for their annual Council of Forest Industries convention in the spring of 1975 were in a pretty sombre mood given the slumping levels of their respective businesses.

The members of COFI’s Northern Interior Lumber Sector (NILS), as it was then called, had endured a couple of tough years. The experts and commentators called it a recession or depression and the worst in 30 years. About 85 per cent of the NILS members’ total lumber production was destined for the U.S. But the market was in the tank while other operating costs were rising. The experts and commentators were predicting a high of 1.6 million housing starts by the end of 1975.

Canada’s share of the U.S. lumber market was around 21 per cent, up from about 16 per cent in 1968.

Japan, on the other hand, was registering around 2.8 million housing starts annually and the rate was increasing. Some NILS member companies had been seriously looking at the Japanese market since the early 1970s and promoting the use of SPF platform frame construction. In contrast, the B.C. coastal forest company MacMillan Bloedel began selling wood products into the Japanese market around 1923.

In 2011, it’s estimated about 70 per cent of the regional COFI membership mills lumber production is marketed in the U.S.

And a revealing fact from the summer of 2011. In May, for the first time, Chinese buyers paid more for B.C. softwood lumber exports than their counterparts in the U.S., according to B.C. Stats figures.